WTO and its Impact on India Assignment on Business Environment

Submitted To: Submitted By:

Tilak Raj Aashish Arora

Ravinder Singh Atwal

Prof. University Business School MBA-Gen-A

Panjab University, Chandigarh 1st Year

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Table of Contents

Contents

INTRODUCION: ........................................................................................................................................ 3

History of WTO:....................................................................................................................................... 3

GATT: ................................................................................................................................................... 3

GATT rounds of negotiations: ............................................................................................................. 3

World Trade Organisation (WTO): .......................................................................................................... 4

Principles of the trading system: ........................................................................................................ 5

Organizational structure: .................................................................................................................... 6

Agreements: ........................................................................................................................................ 6

WTO Trade Rounds: ............................................................................................................................ 8

IMPACT OF THE WTO ON THE INDIAN ECONOMY: ................................................................................ 9

INTRODUCTION: .................................................................................................................................. 9

Trade Related Investment Measures (TRIMS) .................................................................................... 9

Trade Related Intellectual Property Rights (TRIPS) ........................................................................... 10

Agreement on Agriculture (AOA): ..................................................................................................... 10

Agreement on Sanitary and phyto-sanitary measures (SPM): ......................................................... 10

Multi-Fiber Agreement (MFA): ......................................................................................................... 11

Certain Other Unresolved Issues: ..................................................................................................... 11

Major Conclusions............................................................................................................................. 12

IMPACT:................................................................................................................................................. 13

FAVOURABLE IMPACT : ..................................................................................................................... 13

UNFAVOURABLE IMPACT : ................................................................................................................ 14

CONCLUSION : ................................................................................................................................... 15

WTO AND ITS IMPACT ON SMALL SCALE INDUSTRIES IN INDIA ........................................................... 16

IMPACT OF DUMPING ON INDIAN INDUSTRY ...................................................................................... 16

What India should do? .......................................................................................................................... 17

Raising Quality Standard of Domestic Products: .............................................................................. 18

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INTRODUCION: Indian economic policy after independence was influenced by the colonial experience, which

was seen by Indian leaders as exploitative, and by those leaders' exposure to democratic

socialism as well as the progress achieved by the economy of the Soviet Union.

Domestic policy tended towards protectionism, with a strong emphasis on import

substitution, industrialization, state intervention, a large public sector, business regulation,

and central planning, while trade and foreign investment policies were relatively liberal.

India's economy was mostly dependent on its large internal market with external trade

accounting for just 20% of the country's GDP. But after sometime it started liberalising the

economy and became the member of various groupings to facilitate trade.

History of WTO:

GATT: General Agreement on Tariffs and Trade (GATT), was established after World War II in the

wake of other new multilateral institutions dedicated to international economic cooperation

— notably the Bretton Woods institutions known as the World Bank and the International

Monetary Fund.

A comparable international institution for trade, named the International Trade Organization

was successfully negotiated. The ITO was to be a United Nations specialized agency and

would address not only trade barriers but other issues indirectly related to trade, including

employment, investment, restrictive business practices, and commodity agreements. But the

ITO treaty was not approved by the U.S. and a few other signatories and never went into

effect.

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was negotiated

during the UN Conference on Trade and Employment and was the outcome of the failure of

negotiating governments to create the International Trade Organization (ITO).GATT was

formed in1948 and lasted until1993, when it was replaced by the World Trade Organization

in 1995.

GATT rounds of negotiations: From Geneva to Tokyo:

Seven rounds of negotiations occurred under GATT. The first real GATT trade rounds

concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought

about a GATT anti-dumping Agreement and a section on development. The Tokyo Round

during the seventies was the first major attempt to tackle trade barriers that do not take the

form of tariffs, and to improve the system, adopting a series of agreements on non-tariff

barriers, which in some cases interpreted existing GATT rules, and in others broke entirely

new ground.

Uruguay Round:

Well before GATT's 40th anniversary, its members concluded that the GATT system was

straining to adapt to a new globalizing world economy. In response to the problems identified

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in the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain

countries' policies on world trade GATT could not manage etc.), the eighth GATT round —

known as the Uruguay Round — was launched in September 1986, in Punta del Este,

Uruguay.

It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend

the trading system into several new areas, notably trade in services and intellectual property,

and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT

articles were up for review. The Final Act concluding the Uruguay Round and officially

establishing the WTO regime was signed April 15, 1994, during the ministerial meeting at

Marrakesh, Morocco, and hence is known as the Marrakesh Agreement.

The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of

the Uruguay Round negotiations (a distinction is made between GATT 1994, the updated

parts of GATT, and GATT 1947, the original agreement which is still the heart of GATT

1994). GATT 1994 is not however the only legally binding agreement included via the Final

Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings

was adopted. The agreements fall into a structure with six main parts:

The Agreement Establishing the WTO

Goods and investment — the Multilateral Agreements on Trade in Goods including

the GATT 1994 and the Trade Related Investment Measures (TRIM)

Services — the General Agreement on Trade in Services

Intellectual property — the Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS)

Dispute settlement (DSU)

Reviews of governments' trade policies (TPRM)

World Trade Organisation (WTO): The World Trade Organization (WTO) is an organization that intends to supervise and

liberalize international trade. The organization officially commenced on January 1,1995

under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade

(GATT),which commenced in 1948.

The organization deals with regulation of trade between participating countries, it provides a

framework for negotiating and formalizing trade agreements, and a dispute resolution process

aimed at enforcing participants' adherence to WTO agreements which are signed by

representatives of member governments and ratified by their parliaments.

The WTO has 157 members representing more than 97% of total world trade and 30

observers, most seeking membership. The WTO is governed by a ministerial conference,

meeting every two years a general council, which implements the conference's policy

decisions and is responsible for day-to-day administration and a director-general, who is

appointed by the ministerial conference. The WTO's headquarters is at the Centre William

Rappard, Geneva, Switzerland.

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Principles of the trading system: The WTO establishes a framework for trade policies; it does not define or specify outcomes.

That is, it is concerned with setting the rules of the trade policy games. Five principles are of

particular importance in understanding both the pre-1994 GATT and the WTO:

1. Non-Discrimination.

It has two major components:

Most favoured nation (MFN) rule

National treatment policy

Both are embedded in the main WTO rules on goods, services, and intellectual property,

but their precise scope and nature differ across these areas.

The MFN rule requires that a WTO member must apply the same conditions on all trade

with other WTO members, i.e. a WTO member has to grant the most favorable conditions

under which it allows trade in a certain product type to all other WTO members."Grant

someone a special favour and you have to do the same for all other WTO members.‖

National treatment means that imported goods should be treated no less favorably than

domestically produced goods (at least after the foreign goods have entered the market)

and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security

standards et al. discriminating against imported goods).

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise

because of the MFN rule, and a desire to obtain better access to foreign markets. A

related point is that for a nation to negotiate, it is necessary that the gain from doing

so be greater than the gain available from unilateral liberalization; reciprocal

concessions intend to ensure that such gains will materialise.

3. Binding and enforceable commitments. The tariff commitments made by WTO

members in a multilateral trade negotiation and on accession are enumerated in a

schedule (list) of concessions. These schedules establish "ceiling bindings": a country

can change its bindings, but only after negotiating with its trading partners, which

could mean compensating them for loss of trade. If satisfaction is not obtained, the

complaining country may invoke the WTO dispute settlement procedures.

4. Transparency. The WTO members are required to publish their trade regulations, to

maintain institutions allowing for the review of administrative decisions affecting

trade, to respond to requests for information by other members, and to notify changes

in trade policies to the WTO. These internal transparency requirements are

supplemented and facilitated by periodic country-specific reports (trade policy

reviews) through the Trade Policy Review Mechanism (TPRM).The WTO system

tries also to improve predictability and stability, discouraging the use of quotas and

other measures used to set limits on quantities of imports.

5. Safety valves. In specific circumstances, governments are able to restrict trade. There

are three types of provision in this direction:

articles allowing for the use of trade measures to attain non-economic objectives

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articles aimed at ensuring "fair competition"

provisions permitting intervention in trade for economic reasons.

Exceptions to the MFN principle also allow for preferential treatment of developing

countries, regional free trade areas and customs unions.

Organizational structure: The General Council has multiple bodies which oversee committees in different areas, re the

following:

1. Council for Trade in Goods

There are 11 committees under the jurisdiction of the Goods Council each with a specific

task. All members of the WTO participate in the committees. The Textiles Monitoring Body

is separate from the other committees but still under the jurisdiction of Goods Council. The

body has its own chairman and only 10 members. The body also has several groups relating

to textiles.

2. Council for Trade-Related Aspects of Intellectual Property Rights

Information on intellectual property in the WTO, news and official records of the activities of

the TRIPS Council, and details of the WTO's work with other international organizations in

the field.

3. Council for Trade in Services

The Council for Trade in Services operates under the guidance of the General Council and is

responsible for overseeing the functioning of the General Agreement on Trade in

Services (GATS). It is open to all WTO members, and can create subsidiary bodies as

required.

4. Trade Negotiations Committee

The Trade Negotiations Committee (TNC) is the committee that deals with the current trade

talks round. The chair is WTO's director-general. The committee is currently tasked with

the Doha Development Round.

The Service Council has three subsidiary bodies: financial services, domestic regulations,

GATS rules and specific commitments. The General council has several different

committees, working groups, and working parties. There are committees on the following:

Trade and Environment; Trade and Development (Subcommittee on Least-Developed

Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget,

Finance and Administration. There are working parties on the following: Accession. There

are working groups on the following: Trade, debt and finance; and Trade and technology

transfer.

Agreements: The WTO oversees about 60 different agreements which have the status of international legal

texts. Member countries must sign and ratify all WTO agreements on accession. A discussion

of some of the most important agreements follows:

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The Agreement on Agriculture came into effect with the establishment of the WTO at the

beginning of 1995. The AOA has three central concepts.

Domestic support,

Market access

Export subsidies

The General Agreement on Trade in Services was created to extend the multilateral

trading system to service sector, in the same way the General Agreement on Tariffs and

Trade (GATT) provides such a system for merchandise trade. The Agreement entered into

force in January 1995.

The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down

minimum standards for many forms of intellectual property (IP) regulation. It was negotiated

at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in

1994.

The Agreement on the Application of Sanitary and Phytosanitary Measures — also

known as the SPS Agreement was negotiated during the Uruguay Round of the General

Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at

the beginning of 1995.

Under the SPS agreement, the WTO sets constraints on members' policies relating to food

safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and

plant health (imported pests and diseases).

The Agreement on Technical Barriers to Trade is an international treaty of the World

Trade Organization. It was negotiated during the Uruguay Round of the General Agreement

on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of

1994. The object ensures that technical negotiations and standards, as well as testing and

certification procedures, do not create unnecessary obstacles to trade".

The Agreement on Customs Valuation, formally known as the Agreement on

Implementation of Article VII of GATT, prescribes methods of customs valuation that

Members are to follow. Chiefly, it adopts the "transaction value" approach.

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WTO Trade Rounds:

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IMPACT OF THE WTO ON THE INDIAN ECONOMY:

INTRODUCTION: India is a founder member of World Trade Organization, and also treated as the part of

developing countries group for accessing the concessions granted by the organization. As a

result, there are several implications for India for the various agreements that are signed

under WTO. Let us understand each agreement in general, what it means and its implications

for India in specific.

India was a signatory of the General Agreement on Tariffs & Trade (GATT), and as a part

of the commitment had to change several laws and policies; the major changes that were

incorporated were as a follows

Reduction of peak and average tariffs on manufactured products

Commitments to phase out the quantitative restrictions over a period as these were

considered non-transparent measure in any countries policy structure.

The result of this agreement as mentioned earlier was limited as, GATT was only an

agreement and there was no enforcing agency to strictly implement the clauses and punish the

country which breaks the clauses. Thus the impact was partial. However, with WTO coming

into effect, the competition from imports for the domestic firms has increased. WTO had the

deadline till 2005, for the domestic policy was supposed to phase out the QR's; for those

countries which face severe balance of payments problems special concession period was

given. Thus it is very clear that only those firms that have competitive advantage would be

able to survive in the long run, and those firms which are weak would fade into history in the

process.

Trade Related Investment Measures (TRIMS) The agreement relates to investments originating from one country to another. The agreement

prohibits the host country to discriminate the investment from abroad with domestic

investment, which implies that it favours national treatment of foreign investment. Besides

this, there are several other clauses of the agreement totaling to 5 in this segment, one

agreement requires investment to be freely allowed within domestic borders without any

maximum cap on it. Another restricts to impose any kind of export obligation or import cap

on the investment. Another requires that there should not be any domestic content

requirement on foreign firms operating and manufacturing in other countries.

These agreements have a direct impact on our Trade, Investment and foreign exchange

policy, domestic annual budgetary proposals and also on the industrial policy.

Implementation process for the above requires proper preparation by the industries and policy

makers, as sudden change may result in loss of revenue and decline of foreign exchange for

the government and economy, and it may result in decline of market share and profitability of

businesses, decline in employment opportunities and over all decline in growth.

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Trade Related Intellectual Property Rights (TRIPS) An intellectual property right refers to any creation of human mind which gets legal

recognition and protection such that the creator of the intangible is protected from illegal use

of his creation. This agreement includes several categories of property such as Patents,

Copyrights, Trademarks, Geographical indications, Designs, Industrial circuits and Trade

secrets.

Since the law for these intangibles vastly varied between countries, goods and services traded

between countries which incorporated these intangibles faced severe risk of infringement.

Therefore the agreement stipulated some basic uniformity of law among all trading partners.

This required suitable amendment in the domestic IPR laws of each country. Since this

process is not a simple one, a time period of 10 years was given to the developing countries.

As a result, in India there was a requirement to change the patents act, Trade and merchandise

mark act and the copyright right act. Besides these main laws, other related laws also required

changes.

The main impact of this is on industries such as pharma and bio-technology, because now

with the law in place, it is not possible to reverse engineer the existing drugs and formulas,

change the process and produce the same product. Now new investment in fresh research is

required. This is quite a burden for small industries and there is a possibility that they are

thrown out of business due to competition.

Besides these, the technology transfer from abroad is expected to become costly and difficult.

Strict implementation of law is very important in India, otherwise there could be disastrous

affect on the revenue of industries which invest millions of rupees in Research and

development if their products get infringed.

Agreement on Agriculture (AOA): The Agriculture happens to be one of the most

protected sectors in all the countries without any exceptions, and therefore an agreement on

the agricultural issues have always been evading and debated strongly by all the countries

involved in trade in agriculture.

The agreement on agreement deals with market access, Export subsidies and government

subsidies. Broadly, as of now the requirement is to open up the markets in specific products

in market access and in case of subsidies, it is to go for tarrification and phase it out

eventually or reduce it to bound limits. The immediate impact of the agreement would be on

the policy makers to scrutinize all the items under subsidy, QRs and tariffs. However, the

calculation of AMS reveals that the subsidy given to Indian farmers are much below the

acceptable levels and therefore need not be changed. Looking from other perspective, the

reduction of tariffs and subsidy in export and import items would open up competition and

give a better access to Indian products abroad. However, the concern is on the

competitiveness and sustainability that the Indian farmer would be able to prove in the long

run once the markets open up. Thus there is a requirement to change policy support to meet

the changing needs of Indian agriculture to gear it up for future.

Agreement on Sanitary and phyto-sanitary measures (SPM): this agreement

refers to restricting exports of a country if they do not comply with the international standards

of germs/bacteria etc… if the country suspects that allowing of such products inside the

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country would result in spread of disease and pest, then there is every right given to the

authorities to block the imports.

Indian standards in this area are already mentioned and therefore there is no need to change

the law, but the problem is that of strictly implementing the laws. There is an urgent need to

educate the exporters regarding the changing scenario and standards at the international

arena, and look at the possible consequence and losses to be incurred if the stipulations are

not followed. Therefore, to meet the standards certain operational changes are required in the

industries such as food processing, marine food and other packed food that is being currently

exported from India.

Multi-Fiber Agreement (MFA): This agreement is dismantled with effect from 1

January 2005. The result was removal of QR on the textile imports in several European

countries. As a consequence a huge textile market is opened up for developing countries

textile industry as well as for other countries that have competitive advantage in this area.

The immediate impact is on the garment and textile manufacturers and exporters. However, it

still needs to be seen whether the industry is able and ready to take advantage of the large

markets. This requires quite an amount of modernization, standardization, cost efficiency,

and customization and frequent up gradation of designs to meet the changing need of global

customers. The dismantling of QR also mean more competition to Indian textile exporters

and therefore, it becomes imperative to enhance the competitiveness in niche areas.

Besides these major agreements there are several other agreements such as agreement

on Market Access , which propagates free market access to products and reduction of tariff

and non-tariff barriers; agreement to have Safeguard Measures if there is an import surge

and it is liable to affect the domestic industries in the transition economies. These measures

can include imposing QR for a certain period and also imposing tariffs on the concerned

products. There are other agreements that call for direct reduction of Subsidies on Exports,

which are not permissible, and phasing it out over a period of time. Besides these there are

other Counter-Veiling Duties (CVD) that are permitted to be used in certain conditions.

These are supposed to have an impact positive if they help the industries and negative if they

reduce the cost competitiveness.

The trading countries are allowed to impose an Anti-Dumping Duty (ADD) against

imported products if the charge of Dumping is claimed against them. The requirement is to

prove that the product is being sold at a price, which results in material injury to the domestic

industries. There are several cases in which the duty is imposed but it still remains to be

proven by the Dispute settlement tribunal in case the other trading party opposes the duty

imposed as "unfair". However, the proposal always should come from the representatives of

the industries affected; this may result in a problem, as small industries voice may remain

unheard in the process.

Certain Other Unresolved Issues: There are several clauses in each of the above agreements; where there has been no

consensus arrived. Besides that there are several other cases where there is no consensus on

the entire agreement itself, which means that these are still in their conceptual and drafting

stages.

Some of such agreements are on Labour Standards and core social clauses, which intend to

impose a labour standard and certain norm against exploitation of labour by the organization

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where they work. Such standards are likely to result in banning of certain items exports to

developed world causing severe damage to industries such as Carpet manufacturing, crackers,

leather, handicrafts and sports goods.

There is another agreement, which is still under discussion by member countries; this is

on Trade and Environment. Some countries wish to impose restrictions on trade on

environmental grounds. The agreement revolves around protecting global environment by

enforcing standards on production and consumption. The ranges of clauses are from

production, packaging to transportation of the goods as specified by norms. The main impact

of this clause would be on industries such as seafood, food processing and drugs and

chemical manufacturing. There would also be a overall impact on the export business as the

rules related to packaging would be very stringent.

Another agreement where the consensus is yet to be reached is on Trade and Investment.

The main objective of this agreement is to enable a free operating environment for foreign

investment in host countries such that there is minimum interference and equal rights. There

would be a direct impact on the foreign investment policy and trade policy of the government

with a long-term impact on balance of payment and foreign exchange position of the country.

This agreement would affect almost all industries and services without an exception.

However the specific impact is expected on auto components and small retailers.

Trade and Competition is another agreement on which the discussions are going on to reach

a consensus. The main aim of this is to stop the business practices that distort competition in

any way and to curb monopolistic growth in trade. The agreement would have an impact on

the MRTP act, which needs to be replaced by the new competition law, the process for which

has already started. These changes would result in a more competitive environment and it

would also be a deterrent for big business houses if they wish to expand further in the same

area. Thus, the formation of cartels and mergers and acquisitions would be restricted to a

great extent.

Transparency in Procurements made by the Government is one such clause where it is

being debated to a large extent. This is particularly of concern to developing countries as the

role played by the government in a countries development is much higher than what it is in

other developed countries. This would have a serious impact on the way the government and

other public sector units approach the domestic procurement. This would imply that no

special preference would be given to the domestic suppliers and they also need to compete on

a price basis for getting orders from domestic government. This clearly can mean that many

government suppliers may lose out in competition with efficient and low cost foreign

suppliers.

Major Conclusions The Indian economy has experienced a major transformation during the decade of the 1990s.

Apart from the impact of various unilateral economic reforms undertaken since 1991, the

economy also had to reorient itself to the changing multilateral trade discipline within the

newly written GATT/WTO framework. The unilateral trade policy measures have

encompassed exchange-rate policy, foreign investment, external borrowing, import licensing,

custom tariffs, and export subsidies. The multilateral aspect of India's WTO commitments is

regarding trade in goods and services, trade-related investment measures, and intellectual

property rights.

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After analyzes of the economic effects on India and other major trading countries/regions of

the Uruguay Round (UR) trade liberalization and the liberalization that might be undertaken

in a new WTO negotiating round. India's welfare gain is expected to be 1.1% ($4.7 billion

over its 2005 GDP) when the UR scenarios get fully implemented. The additional welfare

gain is an estimated 2.7% ($11.4 billion) when the assumed future WTO round of multilateral

trade liberalization is achieved.

It is expected that Resources would be allocated in India to the labour-intensive sectors such

as textiles, clothing, leather and leather products, and food, beverages, and tobacco. These

sectors would also experience growth in output and exports. Real returns to both labour and

capital would increase in the economy. However as mentioned above in the analysis of each

agreement there is a serious and urgent need to re-look the strategies followed by individual

firms in the changing context of increasing competition and opened markets. As said time

and again there is no reversal of agreements, so what is required is to make internal policy

changes at macro, meso and micro level to suit the changed external environment.

IMPACT: The World Trade organization was established to deal with all the major aspects of

international trade and it had far reaching effects not only on India’s foreign trade but also on

its internal economy. The WTO has both favourable and non-favourable impact on the Indian

economy. It can be analysed on the basis and general concepts.

FAVOURABLE IMPACT :

Increase in export earnings :

Increase in export earnings can be viewed from growth in merchandise exports and growth

in service exports :

Growth in merchandise exports:

The establishment of the WTO has increased the exports of developing countries

because of reduction in tariff and non-tariff trade barriers. India’s merchandise

exports have increased from 32 billion us $ (1995) to 185 billion u $ (2008-09).

Growth in service exports :

The WTO introduced the GATS (general Agreement on Trade in Services ) that

proved beneficial for countries like India.

Agricultural exports :

Reduction of trade barriers and domestic subsidies raise the price of agricultural

products in international market, India hopes to benefit from this in the form of higher

export earnings from agriculture

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Textiles and Clothing :

The phasing out of the MFA will largely benefit the textiles sector.

It will help the developing countries like India to increase the export of textiles and

clothing.

Foreign Direct Investment:

As per the TRIMs agreement, restrictions on foreign investment have been withdrawn by the

member nations of the WTO. This has benefited developing countries by way of foreign

direct investment, euro equities and portfolio investment. In 2008-09, the net foreign direct

investment in India was 35 billion us $.

UNFAVOURABLE IMPACT :

1)TRIPs

Protection of intellectual property rights has been one of the major concerns of the

WTO.

As a member of the WTO, India has to comply with the TRIPs standards.

However, the agreement on TRIPs goes against the Indian patent act, 1970, in the

following ways:

• Pharmaceutical sector :

Under the Indian Patent act, 1970, only process patents are granted to chemicals, drugs and

medicines. Thus, a company can legally manufacture once it had the product patent.

So Indian pharmaceutical companies could sell good quality products (medicines) at low

prices.

However under TRIPs agreement, product patents will also be granted that will raise the

prices of medicines, thus keeping them out of reach of the poor people, fortunately, most of

drugs manufactured in India are off –patents and so will be less affected.

• Agriculture

Since the agreement on TRIPs extends to agriculture as well, it will have considerable

implication’s on Indian agriculture. The MNG, with their huge financial resources, may also

take over seed production and will eventually control food production. Since a large majority

of Indian population depends on agriculture for their livelihood, these developments will

have serious consequences.

Micro-organisms :

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Under TRIPs Agreement, patenting has been extended to micro-organisms as well. This mill

largely benefit MNCs and not developing countries like India.

2) TRIMS :

The Agreement on TRIMs also favours developed nations as there are no rules in the

agreement to formulate international rules for controlling business practices of foreign

investors.

Also, complying with the TRIMs agreement will contradict our objective of self – reliant

growth based on locally available technology and resources.

3) GATS:

The Agreement on GATS will also favour the developed nations more.

Thus, the rapidly growing service sector in India will now have to compete with giant foreign

firms.

Moreover, since foreign firms are allowed to remit their profits, dividends and royalties to

their parent company, it will cause foreign exchange burden for India.

4) TRADE AND NON – TARIFF Barriers :

Reduction of trade and non-tariff barriers has adversely affected the exports of various

developing nations. Various Indian products have been hit by. Non- tariff barriers. These

include textiles, marine products, floriculture, pharmaceuticals, basmati rice, carpets, leather

goods etc.

5) LDC exports :

Many member nations have agreed to provide duty – free and quota – free market access to

all products originating from least developed countries.

India will have to now bear the adverse effect of competing with cheap LDC exports

internationally. Moreover, LDC exports will also come to the Indian market and thus

compete with domestically produced goods.

CONCLUSION :

Thus the WTO is a powerful body that will enact international laws on various matters .

It will also globalise many countries and help them to develop their competitive advantages

and seek benefits from advanced technology of other nations.

Though countries like India will face serious problems by complying to the WTO

agreements, it can also benefit from it by taking advantage of the changing international

environment.

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WTO AND ITS IMPACT ON SMALL SCALE INDUSTRIES IN INDIA The small-scale industries sector plays a vital role in the growth of the country. It contributes

almost 40% of the gross industrial value added in the Indian economy. It has been estimated

that a million Rs. of investment in fixed assets in the small scale sector produces 4.62 million

worth of goods or services with an approximate value addition of ten percentage points.

WTO not only frames rules regarding the marketing of produces in agriculture, textiles and

clothing sectors, but also it fixes international standardized labour wages and working

conditions, globalizes the trade and weeds out the corruption at Government level in

Government procurement policies. Further, it facilitates for availing new technologies from

various countries at a lower cost.

Positive impact of WTO on SSIs

After the origin of WTO, the SSIs in India enjoy the following privileges:

Enabling India to export goods to the member countries of the WTO with fewer restrictions.

Reduction of tariffs on the export products to India i.e., Tariff based protection has become

the rule. Export in India has been increased from Rs.13883 crores in 1992 to Rs.53975 crores

in the year 2000 in SSI sector. Prospects in agricultural exports as a result of likely increase

in the world prices of agricultural products due to reduction in domestic subsidies and

barriers to trade. Greater Market orientation Radical trade in SSI sector opened new

investment opportunities thereby the acceleration of economic growth. Availability of

modern technologies from the other countries at reduced cost.

In India, there has been a significant and absolute gain in trade under WTO. Exports

increased marginally from $ 30.63 billion during the year 1995 to $ 44.2 billion in the year

2000 though share in the global trade increased marginally from 0.6 to 0.65 percent. India has

been a net gainer, though in a limited way. Growth in India’s exports has been marginally

above the growth in world exports. This shows that WTO has made significant contribution

to the expansion of world trade (Somayajulu & Venkataramana: 2002).

Conclusion

WTO plays positive role in strengthening the SSIs. On the other hand, it is feared that many

rules of WTO are biased and in the favour of developed countries; they are formulated to

force the developing countries to open their economy which would benefit the developed

countries and many indigenous industries of developing countries might fail as they will not

be able to compete with the international enterprises. This may cause adverse effect on the

employment opportunities in the country.

High investment; High return! Though it is the reason for the handicaps of our SSIs, it can be

confronted by the innovativeness, novelty in products and the development of lean

technologies in the manufacturing sector. Number of Innovative entrepreneurs having strong

need for achievement can surely ensure success and tackle the challenges of open

competitions at global level.

IMPACT OF DUMPING ON INDIAN INDUSTRY Definition:

WTO and its Impact on India

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Dumping is defined – ―As the practice of selling a good in other country at a lower price than

in the domestic market or for a lower price than its cost of production.‖

TOY INDUSTRY

Today Chinese manufacturers sell 80 per cent of the toys in Indian market. A Big toy car

costs 80 Rupee in China and 250 Rupee in India. This is because the kind of technology they

have is excellent. They sell their cheap products in India which destroys Indian domestic toy

market.

It has great impact on India as follows:

Two million workers are in serious trouble.

Indian manufacturers are closing their units.

The same happens in other industry also like electronic lamps, batteries, even crackers of

Diwali.

And India cannot stop imports as it is the member of WTO.

What India should do? The most important things for India to address are speed up internal reforms in building up

world-class infrastructure like roads, ports and electricity supply. India should also focus on

original knowledge generation in important fields like Pharmaceutical molecules, textiles, IT

high end products, processed food, installation of cold chain and agricultural logistics to tap

opportunities of globalization under WTO regime.

India's ranking in recent Global Competitiveness report is not very encouraging due to

infrastructure problems, poor governance, poor legal system and poor market access provided

by India.

Our tariffs are still high compared to Developed countries and there will be pressure to

reduce them further and faster.

India has solid strength, at least for midterm (5-7 years) in services sector primarily in IT

sector, which should be tapped and further strengthened.

India would do well to reorganize its Protective Agricultural policy in name of rural poverty

and Food security and try to capitalize on globalization of agriculture markets. It should

rather focus on Textile industry modernization and developing international Marketing

muscle and expertise, developing of Brand India image, use its traditional arts and designs

intelligently to give competitive edge, capitalize on drug sector opportunities, and develop

selective engineering sector industries like automobiles & forgings & castings, processed

foods industry and the high end outsourcing services.

India must improve legal and administrative infrastructure, improve trade facilitation through

cutting down bureaucracy and delays and further ease its financial markets.

WTO and its Impact on India

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India has to downsize non-plan expenditure in Subsidies (which are highly ineffective and

wrongly applied) and Government salaries and perquisites like pensions and administrative

expenditures.

Corruption will also have to be checked by bringing in fast remedial public grievance system,

legal system and information dissemination by using e-governance.

The petroleum sector has to be boosted to tap crude oil and gas resources within Indian

boundaries and entering into multinational contracts to source oil reserves.

It won’t be a bad idea if Indian textile and garment Industry go multinational setting their foot

in western Europe, North Africa, Mexico and other such strategically located areas for large

US and European markets.

The performance of India in attracting major FDI has also been poor and certainly needs

boost up, if India has to develop globally competitive infrastructure and facilities in its

sectors of interest for world trade.

Raising Quality Standard of Domestic Products: The only way to avoid dumping is that India has to raise its quality standard of domestic

products so that domestic products are better than imported products which will give a reason

to India to ban the Chinese products.